IRS Reminds Parents of Ten Tax Benefits 

Your kids can be helpful at tax time. That doesn’t mean they’ll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.

1. Dependents: In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit: You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit: You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit: The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.

5. Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.  For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with earned income: If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

7. Children with investment income: Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher education credits: Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

9. Student loan interest: You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

10. Self-employed health insurance deduction: If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

This last one is a good tip to ask a Laughlin Associates business consultant about. As the leading incorporation services provider since 1972, we can help you as a small business owner to get the most out of your tax deductions. In fact, if you’re self-employed we can help you get as much 45% back on your taxes this time next year. Want to learn more? Call Laughlin Associates at 1-800-648-0966 or email lee@laughlinusa.com.

*Tips provided by IRS.gov

The AP wire released a story last week revealing just how common it is for millionaires to be audited compared to those earning less than $200K.

In fact a reported, “1 in 8 people earning at least $1 million annually was audited by the Internal Revenue Service last year, making them far likelier to be examined than those making below $200,000,”  according to IRS data released last Thursday.

The article continues on to say that just 1 in 100 individuals earning less than $200,000 had their income tax returns examined.

The 12 percent of millionaire earners audited in 2011 was appreciably higher than the 8 percent who were audited in 2010. IRS officials said the high ratio was part of an effort to demonstrate that tax laws are applied fairly.

“That has been something we’ve concentrated on to assure that there’s equity in the system, to assure that those at the lower end of the spectrum know that those at the higher end of the spectrum are subject to the same rules and enforcement as everyone else,” Steven Miller, deputy IRS commissioner for services and enforcement, said in an interview.

In recent weeks, the President and congressional Democrats have sought to boost taxes on the wealthy as a way to pay for jobs programs, a theme they are expected to continue in this presidential and congressional election year. IRS spokeswoman Michelle Eldridge said the growing portion of millionaire earners’ returns audited is not related to politics.

“The IRS is an agency of civil servants, and we base our audit decisions on tax issues — nothing else. We don’t play politics here,” she said.

Between 2004 and 2009, the percentage of millionaire earners audited ranged between 5 and 7 percent.

The data was divided into only three categories of income: below $200,000, $200,000 and up, and $1 million and higher.

About 1 in 25 people earning $200,000 and more was audited in 2011.

The IRS also audited a greater proportion of large corporations than smaller ones, the data shows.

Last year, 1 percent of corporations with assets under $10 million were audited. Among corporations with assets of $250 million and up, 28 percent were audited.

The IRS said its enforcement efforts to collect all taxes owed — which include audits, court cases and other activities — netted $55 billion last year. That is nearly $3 billion less than the previous year, which Miller attributed to a falloff in estate taxes and corporations writing off their losses.

All together, the IRS audited nearly 1.6 million of the 141 million individual income tax returns that were filed. In 2010 — the most recent year available — more than 8 in 10 individuals audited ended up paying additional taxes.

So, are you prepared? If you are audited the burden of proof lies on you. While you might not be able to avoid an audit, you can make it less painful by following a few simple rules.
 

You should always keep accurate records showing travel, entertainment, meals, seminars, medical, auto and other business deductions you might take. They should contain specific information like the date, amount, reason for the expense, and the names of people who accompanied you.

If you don’t think it’ll happen to you, then think again. You are in the highest risk category for an audit if you are self-employed, or involved with a pass through entity such as a partnership, S-corporation or an LLC.  Your risk also increases if you’re a corporation with reported income of over $200,000.

Taking the time to keep accurate records from the start can save you a tremendous amount of time and hopefully money if and when you are involved in an audit.

If you need help determining whether or not your corporate records may be lacking the proper documentation to successfully pass an audit, give us a call.  No matter how far behind you might be, we can help you accomplish total corporate compliance and asset protection.

Speak to a corporate consultant at 1-800-648-0966 or drop us a line.

*To read the full article, click here.

As you prepare for the upcoming tax season, we wanted to give you a brief rundown of the 2012 tax changes that may apply to you:

* PAYROLL TAX CUT for employees extended through February 29, 2012. (Social security tax rate on wages up to $110,100 will be 4.2% rather than 6.2%.)

* ADOPTION TAX CREDIT decreases to $12,650 for adoption of an eligible child.

* SECTION 179 maximum deduction decreases to $139,000, with a phase-out threshold of $560,000.

* STANDARD MILEAGE RATE for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.

* ESTATE TAX top rate remains at 35%, and the exemption amount increases to $5,120,000. The ANNUAL GIFT TAX EXCLUSION remains at $13,000.

* 401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).

* SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).

* IRA contribution limit remains at $5,000 ($6,000 for 50 and older).

* KIDDIE TAX threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).

* NANNY TAX threshold increases to $1,800.

* TRANSPORTATION FRINGE BENEFIT limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.

* SOCIAL SECURITY taxable wage limit increases to $110,100. Retirees under full retirement age can earn up to $14,640 without losing benefits.

* HSA CONTRIBUTION limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.

If you have further questions about the tax changes that may apply to you and your business in 2012, give Laughlin Associates a call at 1-800-648-0966 or drop us a line to get a qualified referral to an experienced CPA.

*Tax information courtesy of Mostad and Christensen, Inc.

A note from Laughlin Associates’ CEO, Aaron Young

Dear Friends,

With New Year’s weekend right around the corner, we are reminded of the many blessings we’ve received throughout 2011 and remain grateful for the things we cherish most: our families, health, and the continued pursuit of our happiness and freedom.

As we bring in 2012 and savor our time with family and friends, small business owners like you and me remember why we started our companies in the first place and just how much we appreciate the ability to control our own destiny throughout this exciting journey of business ownership.

For our team at Laughlin, this is a time where we reflect on how much we value you: our friends and clients that have motivated us to continue to serve our small business owner community over the past 40 years.

We want to take this time to thank you for your continued support and belief in all that we do here. Without you, we wouldn’t be able to touch the hearts and minds of so many entrepreneurs out there like you, working hard every day to reach their dreams.

Thank you for taking part in our continued journey to share the knowledge business owners need for success, but so often can’t get their hands on.

The last couple of years haven’t been the easiest for many business owners. By joining us this past year you have taken the right step toward building your dreams and reaching your goals.

At Laughlin Associates, our family here has grown and changed over our many years in business, and we want to thank you for being a constant reminder of what the original Laughlin family had in mind when they started this business. The goal was then and still is today, to empower you as a small business owner and to help you to proactively protect, build, and grow your business.

I know the next few years will bring real change for American small-business owners. This is our time to work smarter, not harder! I can’t wait to see all that you have in store for 2012. Thank you for continued trust and support.

Happy New Year to you and yours,

Aaron Young, CEO, Laughlin Associates

With the holidays fast approaching, our thoughts turn to “end of the year” business activities – particularly the financial reports that are due for the upcoming tax season. 

A little panic sets in wondering if we kept every receipt, tracked all our expenses in QuickBooks, and if we took advantage of the many deductions available to us as business owners.

 Here are 3 simple tips for lowering your taxes during the holidays:

1. Turn your road trip into a tax deduction: Schedule to meet with a client or a vendor on your way to the in-laws, and the mileage to the meeting (and back) is tax deductible! (Doesn’t the client deserve a nice holiday gift anyway?) Now you can truly laugh at your father-in-law’s corny jokes because you know the trip was partly paid for by the IRS!

2. Get the gift of tax deductions: Did you know that home office furniture is tax deductible even if you don’t take the home office deduction? So take advantage of the holiday sales and buy that new desk you’ve been eyeing for an extra 20-35% off! (Depending on your tax rate.) Talk about hitting the jack pot!

3. Getting your records in order will save you money: To do this we found a product created by one of our favorite tax experts, Sandy Botkin (a former IRS trainer, CPA and Tax Attorney), that we love because it has solved our Holiday Financial Panic and made taking tax deductions so easy. Taxbot is an amazing digital tax tracker that automatically tracks business mileage with a GPS Mileage Tracker, records expenses and intuitively makes them IRS compliant. It even has a built-in receipt scanner! It even syncs to a secure web portal that offers detailed integrated reports and expert tax training and tips. They really thought of everything!

This holiday season you, too, can take the stress out of tax planning with this ingenious app! 

Get your free 2-week Taxbot trial right here!

Want even more tips and tricks to get the most tax deductions possible as a business owner? Join us for a live webinar from Sandy Botkin on December 15 from 10-11 a.m. PST.

Click here to reserve your spot for “5 Strategies To Maximize Your Tax Deductions And Stay Out Of Trouble With The IRS!”

*Thank you to Sandy Botkin and the team at The Tax Reduction Institute for providing these helpful tips.